(TAX UPDATE) Public Ruling 4/2025: What SME Directors Must Know When Changing Financial Year End

(TAX UPDATE) Public Ruling 4/2025: What SME Directors Must Know When Changing Financial Year End

Introduction

HASiL has issued Public Ruling No. 4/2025 - Notification of Change of Accounting Period by a Company/Limited Liability Partnership/Trust Body/Co-Operative Society, replacing the earlier PR 6/2021.

This ruling may look technical, but it directly affects CP204 instalments, cash flow planning, and penalty exposure especially for companies that change their financial year end (FYE).

The good news is this ruling does not introduce new tax concepts.

Instead, it updates the guidance to reflect current law and long-standing HASiL practice, while clarifying several areas that have caused confusion for years among SME owners and even tax agents.

If your company has changed, or is planning to change, its FYE, this update matters.

Key Highlights from Public Ruling 4/2025

1. More Flexibility to Revise CP204 Estimates

One practical improvement in PR 4/2025 is the clear confirmation that CP204 estimates may now be revised in the 11th month of the basis period, in addition to the earlier revision windows.

This is important because profits are usually more reliable closer to year end. SMEs now have more room to fine-tune instalments and avoid overpaying tax too early.

For many businesses with fluctuating income, this is a welcome clarification.

2. Capital Asset Gains Are Excluded from CP204 Estimates

PR 4/2025 expressly confirms a point that practitioners have applied in practice for years:

Gains or profits from the disposal of capital assets are excluded when computing CP204 estimates.

These are not part of normal operating income and should not distort monthly instalment tax.

This clarification helps prevent inflated CP204 figures when a company sells property, machinery, or other capital assets during the year.

CP204B: Notification Is No Longer Optional

When a company changes its financial year end, notification is mandatory under the Income Tax Act 1967.

Under PR 4/2025, this must be done using Form CP204B, now electronically via e-CP204B only.

The deadline depends on whether the accounting period is shortened or extended.

Shortened accounting period
Example: 31 December to 30 September : CP204B must be submitted 30 days before the end of the new accounting period.

Extended accounting period
Example: 31 December to 31 March : CP204B must be submitted 30 days before the end of the original accounting period.

Key risk
Failure to submit CP204B on time is an offence.
LHDN may continue issuing CP205 instalments based on the old period, creating arrears and penalties that are difficult to unwind later.

Impact on CP204 Instalments

Once CP204B is processed, HASiL will usually issue a revised CP205.

Until then, do not stop paying instalments on your own initiative.

If the basis period is shortened
The estimated tax must be fully paid within the shorter period.
If profits are lower, a CP204A revision should be made to reduce unnecessary cash flow strain.

If the basis period is extended
The original instalments continue.
Additional months will generally follow the last instalment amount.
For example, a 12-month period extended to 18 months may result in six extra instalments.

New CP204 Deadline for the Next Year

A change in FYE also shifts the next CP204 submission deadline.

The rule is simple but often missed:
CP204 for the next year must be submitted 30 days before the start of the new basis period.

This is one of the most common compliance failures we see, resulting in minimum RM200 penalties, even when tax payments are otherwise up to date.

Penalties to Be Aware Of

PR 4/2025 reinforces existing enforcement provisions:

• Failure to notify CP204B : Fine RM200 to RM20,000 or prosecution

• Failure to pay instalments : Automatic 10% increase on unpaid instalments

• Underestimation of tax : 10% penalty if actual tax exceeds estimate by more than 30%

These are administrative penalties that can be avoided with proper planning.

Why Companies Change Financial Year End

In practice, Malaysian companies change FYE for valid reasons, including:

• Alignment with holding company under Companies Act 2016
• Group consolidation requirements
• Better alignment with business cycles
• Avoiding peak audit seasons
• Changes in operations or strategy

What matters is not the reason but how the change is managed from a tax perspective.

KTP’s View

PR 4/2025 is a quiet but important ruling.

It reflects how HASiL already works on the ground, but now puts these practices clearly into writing. For SME owners, the real risk lies not in the tax itself, but in missed notifications, wrong CP204 timing, and poor coordination between accounting and tax.

Changing FYE is not just a Companies Act exercise. It is a tax compliance event.

Handled correctly, it improves planning and cash flow.
Handled poorly, it creates penalties that surface years later.

Call to Action

If your company has changed, or is considering changing, its financial year end, speak to us early.

At KTP, we help clients manage CP204, CP204B, and instalment planning before problems arise, not after penalties are issued.

Good tax planning is not about paying less tax.
It is about paying the right tax, at the right time, with no surprises later.

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